Warner Bros Discovery splits streaming from cable TV in latest media shakeup

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By Dawn Chmielewski, Aditya Soni and Jaspreet Singh

LOS ANGELES (Reuters) -Warner Bros Discovery said it would split into two publicly traded companies, separating its studios and streaming business from its fading cable television networks as the parent of HBO and CNN looks to compete better in the streaming era.

The breakup is the latest unraveling of decades of media consolidation that created global conglomerates spanning content creation, distribution and in some cases, telecommunications.

It unwinds WarnerMedia and Discovery's 2022 merger, aiming to grow the streaming and studios business without the drag of the declining networks unit.

The new streaming-and-studios company will include Warner Bros, DC Studios and HBO Max - the crown jewels of WBD's entertainment library.

The networks unit, which will hold up to a 20% stake in its counterpart, will house CNN, TNT Sports and Bleacher Report.

CEO David Zaslav will lead the streaming and studios unit, while CFO Gunnar Wiedenfels will head the networks unit. The separation will be structured as a tax-free transaction and is expected to be completed by mid-2026.

"We've continued to analyze how our industry is evolving," Zaslav told investors. "The right path forward became increasingly clear ... to separate global networks and streaming and studios into two independent, publicly traded companies."

Most of the company's debt would be held by the global networks company. WBD had gross debt of $38 billion as of March. The company said it secured a $17.5 billion bridge loan from J.P. Morgan that it would use to restructure its debt.

Creditors of WBD are consulting advisers after the entertainment company proposed banning investor cooperation pacts as part of its plan to split, the Wall Street Journal reported on Monday.

Law firm Akin Gump Strauss Hauer & Feld is organizing bondholders to push back against WBD's proposal and negotiate better terms, the WSJ report added, citing people familiar with the matter. Reuters could not immediately confirm the report.

Shares fell almost 3% at midday, reversing the 13% gain that came in the hours after the announcement.

WBD's stock remains down nearly 60% since the merger, hurt by cable subscriber loss, tough streaming competition and investor concerns over the debt-laden company's direction.

Brian Wieser, CEO of Madison and Wall, an advisory firm for media, technology and other companies, said the split will not fix underlying WBD's weakness.

"If anything, (it) could make them worse off by favoring financial engineering over focusing on improving existing operations or pursuing new opportunities for growth...a deal like this can hamstring both sides of the company until the transactions are closed," said Wieser.